Management has decided to change the estimated useful life of a machinery but fails to disclose this change in the financial statements. This violation of GAAP can cause the information to be misleading because it lacks:
Top of Form
Multiple Choice
Neutrality.
Completeness.
Confirmatory value.
Timeliness.
Bottom of Form
The most political issue in the FASB’s deliberations and amendments to GAAP with respect to accounting for employee stock options was:
Top of Form
Multiple Choice
The negative effects on assets of recognizing options-related compensation expense in equity.
Accounting for options-related compensation expense relating to options that have not yet been granted to employees.
The negative effects (especially on the earnings of high-tech companies) if they had to recognize compensation expense in an amount equal to the fair value of the options.
The disclosure of options-related compensation expense in the notes to the financial statements.
Bottom of Form
Matching is a(n):
Top of Form
Multiple Choice
Valuation method.
Result of recognizing revenues and expenses that arise from the same transaction.
Cash basis reporting principle.
Asset classification procedure.
Bottom of Form
The most likely important flaw leading to the demise of the APB was the perceived lack of:
Top of Form
Multiple Choice
Competence.
Importance.
Independence.
Confidence.
Bottom of Form
Somerset received $50,400 from a customer for 12 months’ rent in advance of the rental period. How should Somerset record this transaction?
Top of Form
Multiple Choice
| Account Title | Debit | Credit |
| Cash | 50,400 | |
| Deferred rent revenue | 50,400 |
| Account Title | Debit | Credit |
| Cash | 50,400 | |
| Rent revenue | 50,400 |
| Account Title | Debit | Credit |
| Deferred rent revenue | 50,400 | |
| Rent revenue | 50,400 |
| Account Title | Debit | Credit |
| Rent revenue | 50,400 | |
| Deferred rent revenue | 50,400 |
Bottom of Form
The adjusted trial balance for China Tea Company at December 31, 2024, is presented below:
| Debit | Credit | |
| Cash | $ 11,300 | |
| Accounts receivable | 158,000 | |
| Prepaid rent | 5,800 | |
| Inventory | 33,000 | |
| Equipment | 380,000 | |
| Accumulated depreciation | $ 133,000 | |
| Accounts payable | 38,000 | |
| Notes payable (due in three months) | 38,000 | |
| Salaries payable | 4,800 | |
| Interest payable | 13,800 | |
| Common stock | 240,000 | |
| Retained earnings | 67,600 | |
| Dividends | 12,000 | |
| Sales revenue | 480,000 | |
| Costs of goods sold | 220,000 | |
| Salaries expense | 128,000 | |
| Rent expense | 23,000 | |
| Depreciation expense | 38,000 | |
| Interest expense | 2,800 | |
| Advertising expense | 3,300 | |
| Totals | $ 1,015,200 | $ 1,015,200 |
Required:
Prepare the closing entries for China Tea Company for the year ended December 31, 2024.
Note: If no entry is required for a transaction/event, select “No journal entry required” in the first account field.